The determinants of outward foreign direct investment: a firm-level analysis of Indian manufacturing

Author: Pradhan Jaya Prakash  

Publisher: Routledge Ltd

ISSN: 1469-9966

Source: Oxford Development Studies, Vol.32, Iss.4, 2004-12, pp. : 619-639

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Abstract

This paper analyses the determinants of the overseas direct investment activity of Indian manufacturing enterprises. In general, several firm-specific characteristics such as age, size, R&D intensity, skill intensity and export orientation are observed to be important explanatory factors in the outward foreign direct investment (O-FDI) activity of Indian firms. The impact of age and size on O-FDI has been observed to be non-linear. The product differentiation activities and the productivity of firms are other useful factors in overseas production expansion in certain industries. The study reveals that the performance of these firm-specific variables is subject to sectoral dynamics. Internationalization of production activities of Indian firms has been observed to be partly fuelled by policy liberalization during the 1990s.